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Illinois Department of Revenue Issues Post-Wayfair Guidance Implementing October 1 Economic Nexus Law

In June 2018, just before the US Supreme Court ruling in Wayfair, Illinois enacted an economic nexus standard modeled after South Dakota’s law (see our prior coverage). The new Illinois standard takes effect on October 1, 2018. On September 11, the Illinois Department of Revenue (Department) issued an emergency rule (Regulation 150.803), together with other guidance found on its website, intended to assist remote retailers with compliance with the new law. The Regulation was effective immediately. Retailers should note the following key features of the Regulation. *          No retroactivity: The Regulation explicitly states that the economic nexus standard will not have retroactive effect. For time periods prior to October 1, the Regulation provides that “remote retailers must have a physical presence in Illinois before they can be required to collect Use Tax.” It goes on to clarify that the types of activities constituting a physical presence will be those...

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Circuit Court of Cook County Upholds City of Chicago’s Imposition of Amusement Tax on Internet-Based Streaming Services

On May 24, 2018, the Circuit Court of Cook County granted the City of Chicago’s Motion for Summary Judgment in the case captioned Labell v. City of Chicago, No. 15 CH 13399 (Ruling), affirming the City’s imposition of its amusement tax on internet-based streaming services. City’s Amusement Tax and Amusement Tax Ruling #5 The City imposes a 9 percent tax on “admission fees or other charges paid for the privilege to enter, to witness, to view or to participate in such amusement. …” Mun. Code of Chi., tit. 4, ch. 4-156 (Code), § 4-156-020(A); see also id. § 4-156-010 (defining “amusement” in part as a performance or show for entertainment purposes, an entertainment or recreational activity offered for public participation and paid television programming). On June 9, 2015, the City Department of Finance (Department) issued Amusement Tax Ruling #5, taking the position that the amusement tax is imposed “not only [on] charges paid for the privilege to witness, view...

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Finishing SALT: May Wrap-Up and June Highlights

Top Hits You May Have Missed New Mexico Administrative Hearings Office Issues Timely Opinion Regarding State Taxation of Subpart F Income and Dividends from Foreign Affiliates Oregon Bars Use of Three Factor Apportionment Formula McDermott Defeats New York False Claims Act Case Alleging Starbucks Failed to Collect and Remit Sales Tax Looking Forward to June June 1, 2018: Stephen Kranz presented “Diverse Routes to Resolving SALT Audit Issues” at the Georgetown Law Advanced State and Local Tax Institute in Washington, DC.  Stephen discussed numerous complex audit issues facing tax administrators and taxpayers alike, including avenues for equitable resolution of complex audit issues and evaluation of when litigation is the best means of resolution. June 5, 2018: Alysse McLoughlin is presenting “Partnership Audit Regulations: The Great Unknown” at the Federation of Tax Administrators Annual Meeting in Nashville, TN. June 21, 2018: Britt Haxton, Kristen Hazel,...

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Overview of Minnesota’s Response to Federal Tax Reform

Minnesota has several bills pending that would address the Minnesota state tax implications of various provisions of the federal tax reform legislation (commonly referred to as the Tax Cuts and Jobs Act). HF 2942 HF 2942 was introduced in the House on February 22, 2018. This bill would provide conformity to the Internal Revenue Code (IRC) as of December 31, 2017, including for corporate taxpayers. The bill makes clear that, with respect to the computation of Minnesota net income, the conformity to the Internal Revenue Code as amended through December 31, 2017, would be effective retroactively such that the federal provisions providing for the deemed repatriation of foreign earnings could have implications in Minnesota. Repatriation Tax Provisions Under this bill, foreign earnings deemed repatriated under IRC section 965 seem to be included in the Minnesota state tax base; however, Minnesota’s current law provides for a dividend-received deduction that would...

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McDermott’s Take on State Tax after Reform

Due to the current impact and the likelihood that states will consider legislation and agency guidance addressing federal tax reform implications for state business taxes, a united, effective, nationwide advocacy effort is needed to ensure the issues are consistently addressed on a multi-state basis. In preparation for anticipated ramifications, a multi-state coalition will need to consider the subjects summarized below. For further coverage, continue reading here. How McDermott Will & Emery Can Help You: Formation of a coalition of companies and industry trade organizations dedicated to proactively addressing state tax issues raised by federal tax reform on a nationwide basis Identify and track, in real time, proposed state legislative and regulatory responses to federal tax reform Analyze proposed state reforms and develop substantive amendments and comments Develop and implement advocacy campaigns to secure favorable legislative and regulatory...

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District of Columbia Takes First Step to Decouple from Federal Tax Reform

On December 19, 2017, DC Councilmember Mary Cheh introduced the District Tax Independence Act of 2017 (Act), which would require the Chief Financial Officer (CFO) to submit a report outlining the steps and amendments necessary to decouple the District’s tax deduction laws from federal law. As introduced, the Act would require this report by no later than April 30, 2018. The Act was referred to the Committee on Finance and Revenue the same day it was introduced and has not been taken up by the committee, which has been dormant since and is not currently scheduled to meet again until the Council returns in late January. The legislation is co-sponsored by Councilmembers Allen, Evans, McDuffie, Bonds, Gray, Nadeau, R. White, Grosso, Silverman, T. White, and Chairman Mendelson. Notably, all members of the Committee on Finance and Revenue—including Chairman Evans—are co-sponsors. Practice Note The introduction of the Act signals the Council’s overwhelming...

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Illinois Franchise Tax Relief on the Horizon

For Illinois corporate clients who pay significant Illinois corporate franchise tax, relief may be on the way. Illinois is on the verge of joining Delaware and many other jurisdictions that permit simple conversions from corporate to limited liability company (LLC) form, by enacting the “Entity Omnibus Act” as part of House Bill 2963, passed by the Illinois General Assembly and sent to the governor’s office last week. Assuming the governor signs the Bill, the effective date of the new law would be July 1, 2018. Corporations formed under the Illinois Business Corporation Act often face impediments to conversion to an LLC to be free of the franchise tax. The new Act should make planning and execution considerably easier.

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Preparing for the Repeal of Cook County’s Beverage Tax: Requesting Credits and Refunds

Earlier this fall, the Cook County Board voted to repeal its constitutionally suspect, politically unpopular one cent per ounce sweetened beverage tax (Tax). The short-lived Tax will expire at the end of the County’s fiscal year on November 30, 2017. Having been tasked with implementing the Tax, the Cook County Department of Revenue (Department) is now charged with unwinding it. Distributors and retailers who have paid the Tax are entitled to credits or refunds on their unsold inventory at month’s end. The Department recently issued guidance on the credit/refund procedure. Retailers that have paid Tax to their distributors may claim a credit/refund from their distributors for Tax paid on their unsold inventory by completing the Department form entitled “2017 Sweetened Beverage Retailer Inventory Credit Request Form and Schedule A.” Retailers should complete and submit the form to their distributors, not the Department. Distributors must file a final Tax...

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State and Local Tax Aspects of Republican Tax Reform Framework

The White House and Republican congressional leadership released an outline this week to guide forthcoming legislation on federal tax reform. The states conform to the federal tax laws to varying degrees and the extent to which they will adopt any federal changes is uncertain. This memorandum outlines some of the key areas—individual taxation, general business taxation and international taxation— with which the states will be concerned as details continue to unfold. Continue reading.

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Illinois DOR Proposes Use Tax Nexus Standards for Trade Show Retailers

The Illinois Department of Revenue (Department) has issued a proposed new administrative rule addressing the nexus implications for out-of-state retailers attending trade shows in Illinois. The proposed rule, linked here, reaffirms the Department’s long-standing position that all sales made at an Illinois trade show are subject to Illinois Retailers Occupation Tax and any applicable local taxes. In a move welcomed by taxpayers, the proposed rule goes on to delineate a “safe harbor” of activities that will not create nexus for out-of-state retailers with respect to their other Illinois sales. Under the safe harbor provision, an out-of-state retailer’s presence at an Illinois trade show will not create nexus for its other Illinois sales if each of the following conditions is met: The retailer attends no more than two trade shows per calendar year; The retailer is physically present at the two trade shows for an aggregate total of no more than eight days during...

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